Primary links

McDonald's: Corporate Rap Sheet

McDonald's

by Philip Mattera

The strikes taking place at McDonald's outlets across the United States as part of a national wave of job actions by fast-food workers are just the latest in a long series of controversies that have marked the company's half-century history atop the restaurant industry.

In the course of growing into a chain with more than 34,000 restaurants in 118 countries, McDonald's has etched its golden arches logo into the consciousness of much of the world's population. But it has also been widely criticized for contributing to the rise in obesity and other diet-related public health problems. A widely seen 2004 film called Super Size Me consisted of Morgan Spurlock's account of how be made himself ill and gained 25 pound by eating nothing but McDonald’s food for 30 days.

Responding to the pressure, McDonald's has made some adjustments to its menu, but it refuses to end its practice of focusing much of its marketing on children.

McDonald's has also long been criticized for its labor practices. It has fought unionization in many countries and pays the lowest wages it can get away with. In the United States it is one of the largest employers of minimum-wage workers, though in 2015 it responded to pressure by announcing a pay increase at its company-owned outlets..

The Industrialization of Food Service

McDonald's had its origins in a 1954 visit by Ray Kroc, a distributor of milkshake machines, to a roadside hamburger stand in San Bernardino, California operated by the McDonald Brothers. Kroc was astounded to see the volume of business the McDonalds did in serving up burgers, French fries and milkshakes with factory-like efficiency. While the brothers were content with their modest success, Kroc imagined a string of such establishments across the country. He signed a deal with the McDonalds under which Kroc got the right to use their name and techniques in franchising the concept and the brothers would get a bit more than a quarter of the 1.9 percent of the franchisee's gross to be collected by Kroc.

The McDonald's concept was an immediate success. The number of stores went from dozens to hundreds in the early 1960s and to thousands a decade later, while the number of hamburgers sold--displayed on the golden arches sign--soared into the millions and later billions. Kroc set down strict rules by which the restaurants had to be operated; in fact, he turned the management of a McDonald's into a kind of science, the principles of which were taught to aspiring store managers at an institution called Hamburger University.

The system devised by Kroc amounted to the industrialization of food service: the use of equipment and procedures that were so defined that a completely inexperienced teenager--the preferred employee--could be inserted in the system and function with no difficulty. The result was a perfectly tuned machine turning out utterly predictable food in a wholesome and unthreatening environment. Kroc summarized his approach as Quality, Service, Cleanliness, and Value.

McDonald's success served as the catalyst for the emergence of a national fast-food industry. The diners and greasy spoons that had lined the country's roads were steadily replaced by the familiar outlets of a small number of major chains, which were gobbled up by large corporations or which in the case of McDonald's became one itself.

Growth continued in the 1970s, helped by demographic changes such as the migration of women into the waged labor market and by economic changes such as the sharp rise in the cost of food used to prepare meals at home. By spending large sums on marketing and advertising, the chains were able to turn fast-food "dining" into a socially acceptable way for a family to feed itself. Employing devices such as the Ronald McDonald character, McDonald's gained the loyalty of children, who became increasingly influential in determining where a family was going to eat out. In 1972 McDonald's reached $1 billion in total store sales and surpassed the U.S. Army as the nation's biggest dispenser of meals.

The company soon reached a new level of status in sociological and business terms. In 1985 the original McDonald's set up by Kroc in Des Plaines, Illinois, was turned into a museum, and the shares of McDonald's Corp. were added to the elite group making up the Dow Jones Industrial Average. The chain reached the milestone of 10,000 outlets in 1988 and double that only eight years later.

By this time the company's domestic sales were leveling off, while foreign expansion was still going strong. By the early 1990s there were outlets in more than 50 countries, and by the end of the decade it was in more than 100 nations, and foreign revenues were growing much faster than those in the United States. The company, however, also became a target of foreign opponents of U.S.-led corporate globalization, and in 1999 a group of activists led by José Bové dismantled a half-built McDonald’s restaurant in France.

The domestic slump prompted McDonald's to diversify for the first time, purchasing the Donato's pizza chain in the Midwest, the bankrupt Boston Market chain and a minority stake (later increased to a controlling interest) in the Chipotle Mexican Grill chain. A slew of new menu items were flops, and at the end of 2002 McDonald’s had the first quarterly loss in its history.

By the late 2000s the chain had rebounded, in part by responding to changing tastes and great nutritional awareness. It also closed hundreds of restaurants in the U.S. and sold off its non-hamburger holdings.

Labor Issues

McDonald's, like the rest of the fast-food industry in the United States, has remained almost entirely non-union. The company has gone to great lengths to maintain total control of its underpaid work force, using techniques such as lie detector tests.

This non-union philosophy did not go unchallenged. When McDonald's sought to open its first stores in San Francisco in the early 1970s, the company was confronted by unions and local politicians who opposed city approval because of the labor policies of the company. It took a long court battle before McDonald's prevailed. In the late 1970s the fast-food chains faced an intensive campaign in Detroit by an independent group called the Fastfood Workers' Union.

In 1990 a group called the Campaign for Fair Wages staged protests at McDonald's outlets in the Philadelphia area to protest the fact that workers at inner-city locations were being paid less than those in the suburbs. In 1998 a group of workers at a McDonald's outlet in Macedonia, Ohio went on strike and sought representation by the Teamsters union, but the effort fizzled out.

Apart from resisting unions, McDonald's long lobbied in the United States for a lower minimum wage for teenagers, who made up the large majority of the company's labor force. When the Nixon Administration came out in support of the idea, Sen. Harrison Williams of New Jersey charged that it was a quid pro quo for a $255,000 campaign contribution that McDonald's chairman Ray Kroc had made to Nixon's re-election campaign. After years of debate, the "teenwage" concept was finally adopted by Congress when the minimum wage was revised in 1989 (the two-tier system expired in 1993).

Unions have been a bit more evident among McDonald's operations in other countries. In Ireland, Sweden and a few other countries, unions were successful in negotiating working conditions, but the company and its franchisees still sought to keep unions out wherever possible. This policy became a target of a militant labor campaign when the company opened its first outlet in Mexico in 1985. The restaurant workers union laid siege to the facility and forced it to shut down until a successful representation election was held.

Unions in Denmark launched a boycott of the company in 1988 after franchisees refused to sign a collective bargaining contract. After about eight months the company relented and agreed to join the employers' group that negotiated with the Danish hotel and restaurant union. In the 1990s McDonald's resisted union drive in countries such as Canada, Russia and Indonesia. Like Wal-Mart, it later agreed to cooperate with state-controlled unions in China.

McDonald’s has also faced pressures about working conditions in its supply chain. In 2000 the company was rocked by reports that a Chinese sweatshop employing under-aged workers forced to toil up to 16 hours a day was producing toys for its Happy Meals. McDonald’s and its U.S. supplier announced that they were cutting ties with the Chinese subcontractor involved. In 2005 thousands of Vietnamese workers who produced Happy Meal toys staged a two-day strike to protest abusive conditions on the job, and the following year a violent protest occurred at a Happy Meal toy supplier in China.

Actions such as these prompted McDonald’s to join with Walt Disney and a group of NGOs in what was called Project Kaleidoscope to promote better working conditions in the Chinese plants producing goods linked to the two companies. A 2008 report by the initiative spelled out some broad principles and claimed that a group of 10 target facilities had succeeded in improving working conditions.

Back in the United States, the Coalition of Immokalee Workers, which had just successfully pressured the Taco Bell chain to take responsibility for ensuring that farmworkers who picked the tomatoes used in its outlets were treated decently by suppliers, issued a call in 2005 for McDonald’s to do the same. After two years of campaign pressure, McDonald’s gave in and signed a three-way agreement with the Coalition and the growers under which the restaurant chain agreed to pay one cent more per pound for tomatoes to boost farmworker pay.

McDonald's was one of the main targets of a new movement of fast-food workers that was launched in 2012. In November of that year, a group called Fast Food Forward organized a series of rallies and short-term walkouts at various McDonald's and other chain outlets in New York City to express support for higher wages and unionization. Focusing on a demand for an increase in industry wages to $15 an hour, the walkout movement, with substantial support from the Service Employees International Union, spread to other cities such as Chicago, St. Louis, Detroit, Seattle, Milwaukee and Kansas City. The strike escalated in the summer of 2013 leading up to a national day of strikes on August 29.

Some McDonald's restaurants were mentioned in news reports in 2013 on employers paying their workers with prepaid cards that often carry onerous user fees.

In June 2013 the National Guestworker Alliance and other groups organized actions in more than 30 countries calling on McDonald’s to take responsibility for ending the abuse of international contract workers at its restaurants. In the United States, restaurants in places such as Harrisburg, Pennsylvania have faced protests over abusive conditions faced by foreign students brought in to work under the auspices of the U.S. State Department’s Summer Work Travel Program.

In March 2014 McDonald's workers in three states filed suit against the company and several franchise owners, accusing them of ordering employees to work off the clock and other overtime violations.

McDonalds's vulnerability in such cases was increased by a July 2014 decision by the general counsel of the National Labor Relations Board that the company could be held jointly liable for labor violations committed by its franchise operators.

In 2015, amid intensified protests over pay levels, McDonald's announced that it would increase wages at its company-owned outlets to $1 over the local minimum wage.

Hidden Taxpayer Costs

One of the consequences of the low-wage practices of McDonald's is that many of its employees (and those of its franchises) have no choice but to get their health coverage from Medicaid and other taxpayer-funded programs. State-by-state disclosures of which companies account for the most enrollees in these programs usually show McDonald's at or near the top (often it is surpassed by Wal-Mart).

An October 2013 report by the National Employment Law Project estimates that the public assistance provided to McDonald's workers in the U.S. costs $1.2 billion a year.

Sexual Harassment

The U.S. Equal Employment Opportunity Commission has brought a series of cases against McDonald's and some of its large franchise owners in connection with the sexual harassment of young workers on the job. In 2008 franchisee JOBEC Inc. in Colorado paid $505,000 to settle such charges. In 2009 LPG Enterprises in New Mexico paid $115,000. In 2012 MIssoula Mac Inc. in Wisconsin paid $1 million. In 2010 McDonald's itself had to pay $50,000 to settle similar harassment charges at one of its company-owned outlets in New Jersey.

Environmental and Health Record

In the 1980s McDonald's began to come under attack for the huge volume of waste generated by the food packaging used in its restaurants. The Citizens Clearinghouse on Hazardous Wastes and other groups launched a campaign to get the company to end its use of non-biodegradable, non-recyclable polystyrene plastic foam containers. The Clearinghouse dubbed its effort the McToxics Campaign to highlight the little-publicized health effects of the foam particles that migrate from the containers into the food. Customers were urged to mail their used hamburger containers (known as clam shells because of their design) back to the company in protest.

Both McDonald's and the plastics industry reacted with alarm to the campaign, spending many millions of dollars to defend the clam shell. The company later agreed to work with the Environmental Defense Fund on developing ways to cut down trash by recycling packaging and testing reusable utensils and cups. This did not satisfy environmentalists, who were skeptical of the claims about the recycling of the foam containers, so the campaign continued. Then, in 1990, McDonald's announced that it would phase out its use of plastic foam in favor of paper packaging. The change applied to food containers only; styrofoam coffee cups and plastic utensils were still to be used.

The following year the company announced a more ambitious effort, in cooperation with the Environmental Defense Fund, to cut down its generation of solid waste. At the same time, the company opposed a proxy resolution put forth by a group of religious organizations to require observance of the Valdez Principles (Wall Street Journal, April 18, 1991), which would have required a comprehensive commitment to reducing pollutants, conserving natural resources, reducing waste, and using energy more efficiently.

Nutrition and Health Issues

McDonald's was also taken to task for the adverse effects of its products on the internal environment of its customers. The standard McDonald's menu traditionally contained items quite high in saturated fats and sodium. In the early 1990s, under pressure from nutrition groups, the company switched to vegetable oil for its French fries and introduced low-fat milkshakes and frozen yogurt. In 1991 the company went a step further by introducing its McLean Deluxe hamburger, which used a process that substituted about half of the fat with water and a seaweed extract. (It was later dropped in the face of weak demand.)

In 2001 the company faced an uproar among Hindus and vegetarian when it came to light that it was secretly preparing French fries using beef flavoring. There was also litigation over the matter, which McDonald's had to pay $10 million to settle.

In 2003 the company responded to public health concerns by announcing that it would ask its meat and poultry suppliers around the world to reduce their dependence on antibiotics.

In 2004 McDonald’s sought to counter the bad publicity it received from the documentary film Super Size Me by introducing a new line of salads. The following year it announced plans to print nutrition data on its food packaging. That same year, the company agreed to pay $8.5 million to settle a lawsuit alleging that it had failed to inform the public about the presence of dangerous trans fats in the cooking oils used in its restaurants.

In 2006 McDonald’s launched a counter-campaign in response to the release of Chew On This, a book for adolescents by Eric Schlosser and Charles Wilson with content similar to that of Schlosser’s earlier work Fast Food Nation that blamed companies such as McDonald’s for the spread of childhood obesity.

The public relations initiative was not sufficient; the company had to make substantive changes in its menu as well. A significant change came in 2011 when McDonald's finally agreed to reformulate its Happy Meal for children by cutting the portion size of the French fries and adding fruit. Yet it resisted calls to remove the toys--often tie-in trinkets for popular kid's movies--from the meals, which critics said made fast food too alluring for youngsters.

In 2013 Food and Water Watch launched a campaign to pressure McDonald’s to tell its large supplier J.R. Simplot that it would not accept the new genetically engineered potatoes it was planning to introduce. Meanwhile, groups such as Corporate Accountability International are continuing to put pressure on McDonald’s to stop marketing to children.

In July 2014 McDonald's outlets in China had to stop using meat from the Shanghai Husi subsidiary of the U.S. company OSI Group after Chinese media reported on grossly unsanitary conditions at Shanghai Husi's operations as well as the shipment of products after their expiration dates.

"McLibel Case"

In 1990 McDonald's brought a libel suit against several British activists working with London Greenpeace (no relation to Greenpeace International) for the wide-ranging criticism of the company contained in a pamphlet the group had been distributing since the mid-1980s. Two of the defendants, Dave Morris and Helen Steel, decided to fight back, betting that a trial would be an opportunity to bring to light more information about the company's questionable practices.

Representing themselves and paying court costs from donations raised by McLibel support groups in several countries, Morris and Steel in effect put McDonald's on trial. During court proceedings in 1994 and 1995, they aggressively questioned company executives and brought in experts to testify about the labor, health and environmental impacts of the burger empire, including extended discussion of its role in destroying tropical rainforests and thus global warming. A July 18, 1995 front-page article in the Wall Street Journal was headlined: "Turning the Tables: Charged with Libel, Pair of Activists Puts McDonald's on Grill."

In the end the court ruled in McDonald's favor on some but not all the points in contention and awarded damages of only £60,000. The judge found that Morris and Steel had defamed the company with the allegations regarding its role regarding rainforests and third world starvation and the claim about selling unhealthy food, but he deemed accurate the charges that McDonald's advertising was exploitative of children, that it was responsible for cruelty to some animals and that it paid low wages.

In 2005 the European Court of Human Rights ruled that Morris and Steel had not received a fair trial, since they had not been given legal aid, and ordered the British government to pay 35,000 euros in damages to them plus 47,000 in costs.